Oct 29 (Reuters) - Declines in big tech and Internet stocks such as Amazon pushed the Nasdaq lower on Monday, while strength in financial shares mitigated declines for the S&P 500 as investors grappled with a recent spike in market volatility.

The three major U.S. stock indexes lost their initial solid gains from earlier in the session.

Investors are wary of any rally given increased volatility over the past month, stemming from higher interest rates and worries about the economy and trade tensions. The S&P last week flirted with correction territory.

“These growth stocks just got so over-valued it is only natural to see some air come out of that balloon. That could continue for a while,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

“But in terms of the rest of the market that doesn’t have those kinds of extreme valuations, I think we are probably pretty close to the end of the decline,” Massocca said.

The Dow Jones Industrial Average fell 118.42 points, or 0.48 percent, to 24,569.89, the S&P 500 lost 5.17 points, or 0.19 percent, to 2,653.52 and the Nasdaq Composite dropped 81.93 points, or 1.14 percent, to 7,085.28.

Investors may be increasingly nervous about uncertainty surrounding the U.S. congressional elections, which are just a week away.

“Probably the most pervasive headwind is concern about midterm elections,” said Kristina Hooper, chief global market strategist at Invesco. “That is weighing down stocks, particularly technology as there is greater concern about regulation.”

Internet stocks also may have been wounded by Britain’s plan to tax the revenue from online platforms.

In a boost for stocks, shares of software maker Red Hat Inc gave among the biggest supports to the S&P 500, surging 45.2 percent after the company agreed to be bought by IBM Corp for $34 billion. But IBM shares fell 3.0 percent, weighing on the Dow and S&P.

The gains for financials, which rose 1.5 percent, could be a sign of so-called value stocks gaining more favor after losing out to growth stocks during the long-running U.S. bull market.

Investors who are bullish about stocks point to strong corporate profits this year and economic strength. But there are also concerns about the extent of a slowdown in earnings growth next year, while weak housing data has raised some worries about the economy.

Data on Monday showed U.S. consumer spending rose for a seventh straight month in September, but income recorded its smallest gain in more than a year amid moderate wage growth, suggesting the current pace of spending was unlikely to be sustained.

Advancing issues outnumbered declining ones on the NYSE by a 1.30-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored advancers.

The S&P 500 posted 3 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 22 new highs and 144 new lows. (Additional reporting by Sinead Carew in New York and Shreyashi Sanyal in Bengaluru; Editing by Susan Thomas and Chizu Nomiyama)